Wake up: Jobs and exports are related to tax policy

By davidpetraitis, on October 29th, 2010

A friend of mine Roger Conklin wrote a cogent bit of history from his personal perspective. With his permission I post it here:

In the mid 1970s when the US was the world’s #1 exporter with a positive world trade balance for 95 out of the previous 100 years, Sen. William Proxmire (D,WI), proclaimed that Americans living and working abroad served no useful purpose in creating American jobs by selling American exports. To him they were “…swathed in mink spending their tax evasion dollars at the gambling tables of Monte Carlo” and mounted a campaign to exterminate them by also subjecting US citizens living, working and taxed abroad to the same US taxation on their world-wide income as if they had never left our shores.

Congress bought Proxmire’s premise by enacting The Tax Reform Act of 1976 signed by President Ford on October 4, 1976. Made retroactive to January 1, US citizens working abroad, already taxed once by their host country, were suddenly made non-competitive. This Act killed US dominance of the labor-intensive project engineering and construction business in the Middle East and the US exports they produced. More than a few Americans working abroad woke up that October 5 to find their combined US plus foreign tax obligation suddenly exceeded their salaries.

Hundreds of thousands of overseas Americans creating millions of domestic jobs manufacturing for export by insuring a US trade surplus came home because they could not survive this double taxation. The US trade balance dropped from the largest-ever US trade surplus of $12.4 billion in 1975 by $18.5 billion to a $6.1 trade deficit in 1976. The US has never again has a trade surplus and the cumulative 34 year US trade deficit, growing daily by $1.5 billion, now exceeds $7.7 trillion.

Compare the current 12-month $605 billion US trade deficit and record 9.6% unemployment with Germany, a nation whose population and economy are only 1/5 our size and with 7.5% unemployment (its lowest since 1992) and a massive $208 billion trade surplus resulting from “strong demand for German capital goods, in Latin America and Asia, particularly in China.”

Germany is a direct competitor of the US for this business but because it encourages Germans to live, work abroad and sell exports whereas the US punishes our own citizens with double taxation so they will stay home, the Germans win and we lose. Germany’s higher-priced exports capture this market and, although its per-capita imports are more than twice ours, they have an ever-growing job-creating trade surplus. Germany has feet on the ground abroad capturing export sales while our Government leaders rant and rave about China’s monetary policies rather than repealing this double tax that prevents Americans from working abroad and creating jobs at home by selling our very competitively-priced exports.

1 comment to Wake up: Jobs and exports are related to tax policy

Excellent comment on a devastating US tax policy which is keeping the United States from exporting as much as it should, and as President Obama wants.
Other countries treat their citizens living overseas as assets. The United States treats us all as huge liabilities. More than just a shame, it’s tragic for the country !!!